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Debit Card Fraud Detection

This document discusses using a Hidden Markov Model to detect debit card fraud. It proposes training an HMM with normal cardholder transaction data and flagging transactions with low probability as potentially fraudulent. The existing system detects fraud after complaints, whereas the proposed system would detect fraud in real-time as transactions are processed. It argues HMM is well-suited because transaction contents are unknown but spending patterns can identify anomalies. The proposed system aims to more quickly detect fraud while reducing false positives and tedious employee work.

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Amir Amirthalingam
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386 views3 pages

Debit Card Fraud Detection

This document discusses using a Hidden Markov Model to detect debit card fraud. It proposes training an HMM with normal cardholder transaction data and flagging transactions with low probability as potentially fraudulent. The existing system detects fraud after complaints, whereas the proposed system would detect fraud in real-time as transactions are processed. It argues HMM is well-suited because transaction contents are unknown but spending patterns can identify anomalies. The proposed system aims to more quickly detect fraud while reducing false positives and tedious employee work.

Uploaded by

Amir Amirthalingam
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Debit Card Fraud Detection Using

Hidden Markov Model


Abstract:

Now a day the usage of credit cards has dramatically increased. As credit card
becomes the most popular mode of payment for both online as well as regular purchase, cases
of fraud associated with it are also rising. In this paper, we model the sequence of operations
in credit card transaction processing using a Hidden Markov Model (HMM) and show how it
can be used for the detection of frauds. An HMM is initially trained with the normal behavior
of a cardholder. If an incoming credit card transaction is not accepted by the trained HMM
with sufficiently high probability, it is considered to be fraudulent. At the same time, we try to
ensure that genuine transactions are not rejected. We present detailed experimental results to
show the effectiveness of our approach and compare it with other techniques available in the
literature.

Existing System:

In case of the existing system the fraud is detected after the fraud is done that is, the fraud is
detected after the complaint of the card holder. And so the card holder faced a lot of trouble
before the investigation finish. And also as all the transaction is maintained in a log, we need
to maintain a huge data. And also now a days lot of online purchase are made so we don’t
know the person how is using the card online, we just capture the IP address for verification
purpose. So there need a help from the cyber crime to investigate the fraud. To avoid the
entire above disadvantage we propose the system to detect the fraud in a best and easy way.

Proposed System:

In proposed system, we present a Hidden Markov Model (HMM).Which does not require
fraud signatures and yet is able to detect frauds by considering a cardholder’s spending habit.
Card transaction processing sequence by the stochastic process of an HMM. The details of
items purchased in Individual transactions are usually not known to any Fraud Detection
System(FDS) running at the bank that issues credit cards to the cardholders. Hence, we feel
that HMM is an ideal choice for addressing this problem. Another important advantage of the
HMM-based approach is a drastic reduction in the number of False Positives transactions
identified as malicious by an FDS although they are actually genuine. An FDS runs at a credit
card issuing bank. Each incoming transaction is submitted to the FDS for verification. FDS
receives the card details and the value of purchase to verify, whether the transaction is
genuine or not. The types of goods that are bought in that transaction are not known to the
FDS. It tries to find any anomaly in the transaction based on the spending profile of the
cardholder, shipping address, and billing address, etc. If the FDS confirms the transaction to
be of fraud, it raises an alarm, and the issuing bank declines the transaction.

Advantage

1. The detection of the fraud use of the card is found much faster that the existing
system.

2. In case of the existing system even the original card holder is also checked for
fraud detection. But in this system no need to check the original user as we maintain a
log.

3. The log which is maintained will also be a proof for the bank for the
transaction made.

4. We can find the most accurate detection using this technique.

5. this reduce the tedious work of an employee in the bank

Hardware Requirements

• SYSTEM : Pentium IV 2.4 GHz


• HARD DISK : 40 GB
• FLOPPY DRIVE : 1.44 MB
• MONITOR : 15 VGA colour
• MOUSE : Logitech.
• RAM : 256 MB

Software Requirements
• Operating system :- Windows XP Professional
• Front End : - Asp .Net 2.0.
• Coding Language :- Visual C# .Net
• Back-End : - Sql Server 2000.

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